Driving Change in a Changing Industry

Andrew Fisher – Chief Executive 13th October 2011

“In times of change, the greatest handicap is experience”

John Paul Getty

Background

• An awful industry doing terrible things• Low company morale• Series of poor corporate ‘transformations’• High staff turnover• Mis-selling endemic• Poor economics – small and loss making• Wrong culture/attitude

Background

Sir Callum McCarthy, chairman of the Financial Services Authority, said the system "fails miserably" to create long-term relationships with customers and questioned whether it served the interests of banks, insurance companies or independent financial advisers.

Financial Times, September 18th 2006

“I note that as at May 2006, the top 21 IFAs had turnover of £640 million, but operating losses of £22 million – twice that of a year earlier”

Sir Callum McCarthy

The Market

The IFA Industry was addicted!

IFA Commissions Life Companies

• Totally dependent • Need status quo

• No way out/capital • Feed on dependency

• Leads to non compliance • Exploit wherever weakness

‘Addicts’ ‘Drug Dealers’

And very poorly qualified!

Strategically • IFA’s didn’t understand Adam Smith– Specialism

Technically • Do nothing or mis-sell everything– Scandals

Financially • Millfield, Berkeley Berry Birch– Loss making or bust

Regulatory • ‘Best Advice’ does not exist as a term in the FSA lexicon

– Poor understanding – Appropriate advice

Morally • 70% of Life distribution goes through IFA’s– Soft commissions

In 2006 the IFA Industry was sick!

Strategically • Thousands of unfocussed outlets– No customer segmentation

Technically • Poor physical distribution and weak store layout– Empty shelves and long queues

Financially • Small/negative margin – Limited capital for expansion

Regulatory • Luckily they didn’t have a regulator– They would have been shut down

Morally • Heavily dependent on sales overriders (bribes)

In the 80’s Food Retailing was sick!!

Tesco – A case study

From:1980’s Pile it high and sell it cheap

To:2000’s Focus on the customer

Drive efficiencyQuality product

The No. 1 retailer in the UK

Retailing – what changed?

Branded Manufacturer vs. Distribution

Market Capitalisation 1980

Pile it high – sell it cheap

Tesco£180m

Unilever£800m

Manufacturer vs. Retailer

Every little helps

Market Capitalisation 2011

Unilever£26,000m

Tesco£30,000m

To be the leading Wealth Adviser in the UK

Independent, holistic financial planning supported by discretionary investment management

Manifesto - 19th June 2007:Fees not CommissionEducation not Ignorance Integrity not StealthHolistic not LimitedIndependent not Tied

 

The Towry Approach

Building Blocks I

• Market opportunity• Regulatory pressure RDR + TCF + PBR• Darwinian drive• Corporate transactions

Building Blocks II

• Culture and values– Team approach– Consultation– Decision making

• Core values– Honesty and integrity– Focus– Excellence– Teamwork– + 1

Communicating the Message I

• To our clients– Statements– Calling direct– Client letters– Comfort seminars– COI seminars– Industry seminars– Press ‘thought pieces’

Communicating the Message II

• To our people– Roadshows– Presentations– Intranet– Shareholders conference– Induction programme– Masters programme– TCC– Staff survey– ‘Ask Andrew’

Set backs and road blocks

• Industry resistance• Redundancy programme• Economic climate• EJ publicity

Results so far – AUM growth

2006 2007 2008 2009 20100.0

1.0

2.0

3.0

4.0

5.0

Closing AUM (£bn)

EBITDA growth

2005 2006 2007 2008 2009 20100.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

£m

Breakeven

Financial Conclusions

• What if there’s no crisis?– Invent one

• Apply the 80:20 rule• Don’t forget to pay the bills• Remember why you’re in the swamp• Give people ownership

Practical Conclusions

• A thousand small steps– Unless you’re crossing a gorge

• Put the fire’s out first• Build consensus

– Unless everyone else is wrong

• Publicise success– Recognise failures

• Deliver the plan

Overall Perspective

• You cannot over communicate• Everything needs to be connected• Never let a good crisis go to waste• Celebrate success• Culture is everything

Thank you